Dave Says: Make Impulsive Son Earn Your Largesse

Dear Dave: I recently received a beneficiary IRA when my mother passed away. I also received a small part of her estate. I’d like to share some of this windfall with my 24-year-old son. He’s a good boy, but he’s pretty impulsive and not good with money. Do you have any suggestions? —Kimberly

Dear Kimberly: I’m sorry to hear about your loss. It’s tough enough losing your mom without having to worry about a grown son with money issues.

I’m sure he’s a good kid, but I don’t like the idea of just giving him money when you already know he’s impulsive. Over the years, I’ve learned that handing money to someone who’s financially irresponsible is not a good plan. Lots of people think they’d be fine if they just had more money, and that’s generally not the case. You have to ask yourself if you’d really be helping this young man by giving him a bunch of money. More than likely, the answer is no.

You have several options. But, at his age, it might be a good idea to attach a few strings to him getting any of the money. Set up some guidelines designed to improve his behaviors in a few areas, and you could give him the money if he meets the requirements. Don’t make him jump through a bunch of hoops for no reason. I’m talking about things that will train and educate him to live a more productive and responsible life in the future—both financially and as a mature, responsible adult in general.

This is fair to you both, and it’s also a way you can help him help himself. And hey, if he refuses to cooperate or cops an attitude, you can always just keep the money until he finally grows up a little! —Dave

Dear Dave: We paid off our cars a few months ago, and that freed up almost $800 a month. We have two small children, and we’d like to take a camping trip in a few months, but we would need a roomier vehicle. We found a used van, and we think we could have it paid off in 12 months. We’d still have more money left than before, so would this be OK? —Melissa

Dear Melissa: I’m confused. Are you telling me that you just got out from under $800 worth of car payments each month, and now you want to go right back and pick up another one? I think you’ve missed the point of my plan. The point is to get out of debt, because living debt-free is less stressful. Live like no one else, so that later you can live like no one else!

What you’re saying is you’re thinking about putting your family’s financial future in jeopardy because you want to go on a little camping trip in a roomier car. This is a really bad plan. You’re talking about a luxury item. I went without a vacation for four years trying to get my life back together after I went broke. Now, I’m not suggesting that you live with this attitude for the rest of your life, but I’m pretty sure there are other ways to make this trip happen.

You don’t need a different vehicle to go camping. Buy a couple of tents, throw them in the back of the car, and head for the woods. If your cars are really just too small to handle everything, then rent a bigger car for the weekend. I’d rather you spend a couple hundred bucks on that instead of picking up another car payment.

Your mindset worries me, Melissa, because it’s just not logical. If you want to get out of debt so you can have a better life, then why in the world would you go out and saddle yourself with more debt all over again?! —Dave

Dear Dave: I recently lost my job due to layoffs. I’m luckier than most, because I’m debt-free except for my house, and I have three months of expenses saved. I’ll also receive a severance package from my former employer, and my wife still has her job. I’m struggling with whether or not to file for unemployment compensation. Do you think it’s morally OK to do this? —Brent

Dear Brent: I don’t have a problem, morally or otherwise, with accepting something I’ve already paid for. The Social Security system in this country is a complete and abysmal mathematical failure. It’s proof that socialism doesn’t work. But that doesn’t mean I’m not going to take my money out; the government took it from me in the first place!

Now, if accepting unemployment benefits causes you to get the idea you can sit on your butt at home and not do anything, then I’d question your character. I’m not hearing that kind of mentality from you, though. You sound like a hard-working guy, and you two have obviously been pretty smart and responsible with your finances.

Make sure you look at your severance package as “survival money.” You’ll know exactly how much you’ll get, so make a budget and make it stick. Cut all excess spending, which means no more eating out, vacations, and all that stuff until you’re working again and everything’s back on solid ground. Then, you can ease back into saving and resume a normal lifestyle. —Dave

Dear Dave: I think I made a big mistake when I bought my car. I’m having a hard time affording the $500 a month payments, because I only make minimum wage at my job and work 35 hours a week. My boyfriend, who was supposed to help me pay for it, has moved out and left me. I owe $20,000 on the car, but I know it’s still worth about $19,000. What can I do? —Rachel

Dear Rachel: Sell the car! You went car crazy and bought a vehicle that was way out of your league.

Right now, your entire financial world is wrapped up in paying for this thing and depending on a boyfriend to help make the payments was a mistake, too. When he left, so did the financial support.

At this point all you need is enough credit to cover the hole that you dug. Go to your local bank or credit union and try to get a very small loan from them – about $3,000. If the car will sell for $19,000 then get it sold and use $1,000 to cover the difference. Then, take the remaining $2,000, and buy yourself a little beater. After that, pick up a part-time job on the side and work like crazy for a few months to get that loan paid back as quickly as possible! —Dave

Best-selling author and money expert Dave Ramsey is host of the nationally syndicated radio program, The Dave Ramsey Show,which is heard by 4.5 million listeners weekdays. His new book is EntreLeadership: 20 Years of Practical Business Wisdom From the Trenches. Ramsey also is the creator of Financial Peace University, a 13-week program that helps people get out of debt, gain control of their finances and learn new behaviors with money that are based on debt-free living, discipline and accountability.